US cable TV giant Comcast has made a formal £22bn bid for Sky that values the UK broadcaster at £12.50 a share.
The move threatens Rupert Murdoch's attempts to take full control of the pay-TV group.
The media mogul's 21st Century Fox has already agreed to buy the 61% of Sky it does not already own - an offer worth about £19bn.
Sky said it was withdrawing its recommendation for the Fox bid following Comcast's move.
Sky shares closed 3.4% higher at £13.59 - more than £1 above Comcast's offer, suggesting a bidding war for control of Sky could erupt.
Disney, which struck a $66bn deal with Fox in December to buy most of its entertainment assets, could also make a play for Sky.
Comcast - the biggest US cable TV firm that also owns the NBC network and Universal Pictures - said its bid offered a premium of about 16% to Fox's £10.75 a share offer.
Chief executive Brian Roberts said: "We have long believed Sky is an outstanding company and a great fit with Comcast. Sky has a strong business, excellent customer loyalty, and a valued brand."
Comcast said it would continue to engage with Sky's independent directors to win a recommendation for its deal.
In February it said it intended to make an offer at the same level of £12.50 a share.
Comcast added that it planned to agree several legally binding commitments with regard to Sky and in particular for Sky News, as well as keeping the group's Osterley headquarters in west London for at least five years.
Mr Roberts added: "With its 23 million retail customers, leading positions in the UK, Italy, and Germany, and its history of strong financial performance, we see significant opportunities for growth by combining our businesses."
He added: "We also understand the role that Sky plays in UK society and in its customers' lives and we are determined to be responsible and trusted owners of Sky."
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